Swiss immigration reforms could impact businesses

31/03/2014

Swiss voters narrowly backed the introduction of immigration quotas from EU countries following a referendum in February 2014.

Some 50.3 per cent of voters were in favour of limiting the number of foreigners being granted permanent access to Switzerland and the European Commission was disappointed in the results. A statement read: "The European Commission regrets that an initiative for the introduction of quantitative limits to immigration has been passed by this vote. This goes against the principle of free movement of persons between the EU and Switzerland."

The big question is; how will this affect the country's businesses?

Skills shortages

One of the biggest challenges facing Swiss corporations is finding highly-skilled employees, especially in technical professions such as IT and engineering. By restricting the movement of talented professionals within the EU, these companies will find it even more difficult to plug any skills gaps.

Switzerland is famous for its thriving financial sector and has a strong reputation in the watch industry. It also has a buoyant IT sector and some of the world's leading pharmaceutical corporations have a strong presence in the country.

Leading watch manufacturers have already voiced their concerns about potential skills shortages as a result of immigration law reforms. In an interview with the Wall Street Journal (WSJ), Jacques Duchene, a Director of Rolex and one of the organisers of the Baselworld Exhibition, commented: "Without border-crossing workers and without foreign workers in general, we will really have trouble."

His views were echoed by Francois Matile, General Secretary of the Convention Patronale De L'industrie Horlogère Suisse - an employers' federation for the Swiss watch industry, who believes businesses will suffer if talent pools become limited to Swiss citizens.

"We need more people and can't find them in Switzerland alone. Foreign workers are vital to the industry," he was quoted as saying.

Switzerland's watch industry is reliant on highly-skilled craftspeople who are capable of producing timepieces that can be sold for upwards of $50,000. According to the WSJ, a significant proportion of the 58,000 people who are employed in the Swiss watch industry cross an international border to get to work and it is feared that new rules might see some experienced technicians take their services elsewhere.

Companies that are opposed to the legislative changes could also offshore some of their manufacturing facilities in order to ensure the most talented foreign employees can still work for them.

Why funding might be harder to come by

It is unclear at this stage exactly how the Swiss government will act upon the results of the referendum, but it has up to three years to make any legal reforms.

As well as skills shortages, the proposed tightening of immigration policies could also restrict Swiss businesses from gaining access to vital funding. The European Commission has already taken away the country's eligibility for EU research and development funding initiatives, which could have a hugely negative impact on the nation's small businesses in particular.

The timing of this sanction is unfortunate for Swiss firms that were hoping to secure investment via the recently-launched Horizon 2020 scheme. This is the biggest ever EU-wide R&D funding programme and an estimated €79 billion will be made available over the next seven years.

Horizon 2020 leaders are currently processing bids, which means Swiss companies are in danger of missing out completely while the uncertainty surrounding the country's immigration policies persists. With the European economy starting to recover, business owners will be looking to expand their operations and increase their headcount in the coming years, but this could be difficult for Swiss firms if they are unable to apply for funding.

With such a strong economy and an unemployment rate of just 3.5 per cent, Switzerland has previously been viewed as a good example for other nations to follow. A recent survey by the Organisation for Economic Co-operation and Development indicated that while the country's gross domestic product output has expanded in the past few decades, much of this growth has been driven by skilled immigrants.

This further underlines the point that Switzerland's businesses could suffer if the government chooses to ignore the concerns of entrepreneurs and goes ahead with immigration law reforms.

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